Recession lifts Lombard

A FALL in bad debts helped Lombard North Central, the consumer credit subsidiary of National Westminster Bank, to lift pre-tax profits from pounds 3.2m in 1991 to pounds 89.8m in the year ended September, writes Peter Rodgers.

Bad-debt charges fell from pounds 171.8m to pounds 155.2m but Lombard said they continued to be a substantial drain on profits and were unlikely to reduce significantly until the economy improved.

Finance companies tend to earn more revenue in a recession because profit on fixed-rate loans rises as market interest rates fall. Lombard proved the point with a pounds 70m rise in profit before bad debts to pounds 245m from pounds 175m.

But the impact of the recession was seen in lower demand from borrowers, with the amount of outstanding loans shrinking by pounds 500m. Lombard said consumer confidence had not yet returned.

It said the current profitability would be sustained to the end of the calendar year, when Lombard's accounting period will be shifted to coincide with NatWest's year-end figures.